June 20, 2005

CTC Keynote: Thomas Malone

Notes from the Collaborative Technologies Conference in NYC, mirrored in the wiki, from a talk I've heard before by Thomas Malone, the author of The Future of Work -- but also with a quick video conference with Jimmy Wales while talking about Wikipedia.

Intro by the event organizer: Interop is the genesis of this conference, even the first shows had a collaboration thread. But most of Interop focuses on IT. Business side of collaboration is the harder problem to solve, the focus of this event and one of the goals is to credentialize the concept of collaboration. Launched a new site, Collaboration Loop. Folks collaborating in the wiki (when the wifi is up)

Thomas Malone starts by asking the question, how many of you are happy this morning? This is one of the happiest audiences he has spoken to, apparently. We are in the early stages of an increase in human freedom in business, an important a change in business as the change of democracy for governments. The reason is it is now possible to have the economic benefits for very large organizations and at the same time have the human benefits of very small organizations: freedom flexibility and creativity. Lower communication costs mean many people have enough information to make decisions for themselves. But, just because it is possible, doesn't mean it will happen -- what drives these changes is what people want. People use their freedom to get more of what they want.

Example: Wikipedia. A little like open source software, but it is an open content encyclopedia. Available for free for anyone to look at, but even more amazing -- available for anyone to change. How could this possibly work? The system automatically maintains a list of Recent Changes and frequent contributors are always watching that list, the repair or put it on a list of things needing repair. Over time it gets better and better. It is already really good, started in 2001, now has over 580,000 articles (English). Not equal in quality to the Brittanica, but in some places better, because it can go in more detail.

Jimmy Wales, via video conference. Asks him what really goes on under the surface. Recent Changes is complemented by other tools to let the community monitor and participate: personal watchlists, communication within the website, it is about social community. People meet each other, form groups and participate with the content. Many people, international, in constant communication through IRC, the site, email. Everyone is a volunteer except a recently hired lead software developer. The big picture vision is a world where everyone in the world is given access to the world's knowledge. This motivates people. The second reason is it is a lot of fun. Nupedia was too much work and not much fun.

This story illustrates human freedom (anyone can be an editor and make any change) coupled with global scale (drawing upon a global pool of experts with results made globally available). What does this have to do with business? Wikipedia isn't a business, is it?

Second example: eBay. One of the most successful companies, revenue growth is faster than any in history. $3.3B revenue in 2004. 430,000 of their sellers make their primary living through eBay -- effectively the second largest employer in the country (behind Walmart, ahead of McDonalds). They get to decide what to sell, when to sell it, how to describe it -- freedoms that are coupled with a scale previously unavailable for small businesses. Again, the combination of freedom and scale. They have invented a new an interesting way to do retailing, essentially outsourcing to independent sellers all the functions of retail. Sellers are not paid by eBay, they pay eBay. Creating the right infrastructure and community has let them generate significant value for themselves and the community.

What makes me believe this will become more common? This is the next logical step in the common pattern in the evolution of human organizations. Societies organized first as Bands (Decentralized, Unconnected), then Kingdoms (Centralized), then Democracies (Decentralized, Connected). What explains this change? A lot of factors involved, but communication costs is the most explanatory factor. Writing let us have larger groups across larger areas. But not everyone can make decisions, so they centralized. For Democracy to make sense, citizens need enough information to vote sensibly (*we are still working on this part, IMHO*). The printing press and widespread literacy let democracy flourish.

Even more interesting, this same pattern is repeating itself now, on a faster time scale, in business. From Small, local businesses to Large, centralized corporations to Empowerment, Outsourcing and Networked organizations. All from 1900 to now. Now it is possible for large numbers of people to participate sensibly in making business decisions.

But just because it is possible, doesn't make it good. Turns out that when people make decisions for themselves, they are highly motivated, creative, use ingenuity, are more flexible and adaptive to their situations (what is the look in the customer's eye) and simply like it better. Those benefits aren't important everywhere -- such as when economies of scale are the focus. But in our increasingly knowledge based an innovation driven economy, the critical factors for business success are the same benefits of decentralized decision making. (*decentralization enables economies of span and scope which provides a sustainable innovative edge*) This is why I think this will happen in more parts of our economy over the next few decades.

Talks through the structure of Loose Hierarchies and the case of AES, the largest electric power producer. Founded under principles of fairness, integrity, social responsibility and fun. They didn't set out to build for big, only the most fun -- by having real responsibility for the things that matter. Most important decision of the company, to buy someone in 2001, was made by someone relatively junior who never met the CEO. If you make a decision, you don't have to get approval -- but you have to ask for advice. Managers: spend a lot of time answering requests for advice by email, setting up structures and pick who to make decisions and play a role in compensation.

Talks through the structure of Democracy. Shareholders vote to elect the Board of Directors who elects the CEO. Many informal democracies in companies. As technology makes information sharing available, we will see more use of this organizational design. Gives the example of the Mondragon Cooperative in Spain, a very democratic example even though it doesn't leverage technology. Workers are owners, one person, one vote, complex multi-level democratic structure. Workers are motivated as owners and decision-makers.

Talks through the structure of Markets and eLance. 1-10 people per firm, temporary combinations for various projects. Similar to how movies are made and housing constructed. At eLance, 200k businesses from over 140 countries registered, 40% of transactions cross national boundaries.

Intel Scenario: internal market for manufacturing capacity. Plan managers sell futures for producs they could produce at specific times in the future, Sales people trade it to be able to sell to external customers, prices fluctuate as knowledge of supply and demand changes, prices determine which products actually get produced in the factories and who gets to sell them. Could this let them produce faster, cheaper and better matched to demand? Enable greater profitability and innovation?

How much of the intelligence of people throughout an organization can we use in a decentralized organization? What percentage is effectively used today. One hand was raised at 90% (it was EEK :-). Survey is similar to the general response to the question, that most organizations don't even begin to take advantage of their human potential.

Shows a video of an experiment of collective piloting of an airplane. Amazingly, the participants successfully navigate a virtual course and has a blast doing it. Uses it as an example for how we may be able to take advantage of our collective intelligence.

What does this mean for your management style? From "command and control" to "coordinate and cultivate." *Paradox of standards: sometimes rigid standards in one part of the organization can enable much more flexibility and decentralization in other parts of the system.* For example, the internet and IP protocol. In a business, if you can figure out the right area to apply standards (quality, financial controls, etc.) and give people lots more freedom in other areas, you can be more confident about the effects. *Paradox of power: the best way to gain power is to give it away.* Linus' empowerment of the Linux community. AES and it's employees. Pierre Omidyar and eBay.

What does this mean for IT? Some of the most important innovations in the coming decades will not be new technologies. They'll be be new ways of organiating work that are made possible by these new technologies. What matters in business is what you do with IT. Another level in the technology stack that is an organizational layer. One of the most imporant messages of the talk is there will be innovations in the technology layers, some of the most important will be at the organizational layer. An important challenge and opportunity as we go forward.

What does this mean for us as individuals? You probably have more choices than you realize. To make choices wisely, you need to thing about what really matters to you. The answers can't be found from logic or politics -- they can only be found by listening to our own inner voices. Concludes by reading this passage:

What can I catually do? The answer is as simple as it is disconcerting: we can, each of us, work to put our own inner house in order. The guidance we need for this work cannot be found in science or technology... but it can still be found in the tradtional wisdom of mankind. -- E.F. Schumacher, Small is Beautiful, 1973.

Side thoughts:
* The meta transitions from decentralized to centralized to connected decentralization is really an explanation of Modernism to Post-Modernism to the Network Age.
* Would be interesting to map the three structures for decision making to three models of production by Yochai Benkler. I'd suggest that a greater role for social signals in Loose Heirarchies than the examples discovered so far.

Comments

CTC Keynote: Thomas Malone

Notes from the Collaborative Technologies Conference in NYC, mirrored in the wiki, from a talk I've heard before by Thomas Malone, the author of The Future of Work -- but also with a quick video conference with Jimmy Wales while talking about Wikipedia.

Intro by the event organizer: Interop is the genesis of this conference, even the first shows had a collaboration thread. But most of Interop focuses on IT. Business side of collaboration is the harder problem to solve, the focus of this event and one of the goals is to credentialize the concept of collaboration. Launched a new site, Collaboration Loop. Folks collaborating in the wiki (when the wifi is up)

Thomas Malone starts by asking the question, how many of you are happy this morning? This is one of the happiest audiences he has spoken to, apparently. We are in the early stages of an increase in human freedom in business, an important a change in business as the change of democracy for governments. The reason is it is now possible to have the economic benefits for very large organizations and at the same time have the human benefits of very small organizations: freedom flexibility and creativity. Lower communication costs mean many people have enough information to make decisions for themselves. But, just because it is possible, doesn't mean it will happen -- what drives these changes is what people want. People use their freedom to get more of what they want.

Example: Wikipedia. A little like open source software, but it is an open content encyclopedia. Available for free for anyone to look at, but even more amazing -- available for anyone to change. How could this possibly work? The system automatically maintains a list of Recent Changes and frequent contributors are always watching that list, the repair or put it on a list of things needing repair. Over time it gets better and better. It is already really good, started in 2001, now has over 580,000 articles (English). Not equal in quality to the Brittanica, but in some places better, because it can go in more detail.

Jimmy Wales, via video conference. Asks him what really goes on under the surface. Recent Changes is complemented by other tools to let the community monitor and participate: personal watchlists, communication within the website, it is about social community. People meet each other, form groups and participate with the content. Many people, international, in constant communication through IRC, the site, email. Everyone is a volunteer except a recently hired lead software developer. The big picture vision is a world where everyone in the world is given access to the world's knowledge. This motivates people. The second reason is it is a lot of fun. Nupedia was too much work and not much fun.

This story illustrates human freedom (anyone can be an editor and make any change) coupled with global scale (drawing upon a global pool of experts with results made globally available). What does this have to do with business? Wikipedia isn't a business, is it?

Second example: eBay. One of the most successful companies, revenue growth is faster than any in history. $3.3B revenue in 2004. 430,000 of their sellers make their primary living through eBay -- effectively the second largest employer in the country (behind Walmart, ahead of McDonalds). They get to decide what to sell, when to sell it, how to describe it -- freedoms that are coupled with a scale previously unavailable for small businesses. Again, the combination of freedom and scale. They have invented a new an interesting way to do retailing, essentially outsourcing to independent sellers all the functions of retail. Sellers are not paid by eBay, they pay eBay. Creating the right infrastructure and community has let them generate significant value for themselves and the community.

What makes me believe this will become more common? This is the next logical step in the common pattern in the evolution of human organizations. Societies organized first as Bands (Decentralized, Unconnected), then Kingdoms (Centralized), then Democracies (Decentralized, Connected). What explains this change? A lot of factors involved, but communication costs is the most explanatory factor. Writing let us have larger groups across larger areas. But not everyone can make decisions, so they centralized. For Democracy to make sense, citizens need enough information to vote sensibly (*we are still working on this part, IMHO*). The printing press and widespread literacy let democracy flourish.

Even more interesting, this same pattern is repeating itself now, on a faster time scale, in business. From Small, local businesses to Large, centralized corporations to Empowerment, Outsourcing and Networked organizations. All from 1900 to now. Now it is possible for large numbers of people to participate sensibly in making business decisions.

But just because it is possible, doesn't make it good. Turns out that when people make decisions for themselves, they are highly motivated, creative, use ingenuity, are more flexible and adaptive to their situations (what is the look in the customer's eye) and simply like it better. Those benefits aren't important everywhere -- such as when economies of scale are the focus. But in our increasingly knowledge based an innovation driven economy, the critical factors for business success are the same benefits of decentralized decision making. (*decentralization enables economies of span and scope which provides a sustainable innovative edge*) This is why I think this will happen in more parts of our economy over the next few decades.

Talks through the structure of Loose Hierarchies and the case of AES, the largest electric power producer. Founded under principles of fairness, integrity, social responsibility and fun. They didn't set out to build for big, only the most fun -- by having real responsibility for the things that matter. Most important decision of the company, to buy someone in 2001, was made by someone relatively junior who never met the CEO. If you make a decision, you don't have to get approval -- but you have to ask for advice. Managers: spend a lot of time answering requests for advice by email, setting up structures and pick who to make decisions and play a role in compensation.

Talks through the structure of Democracy. Shareholders vote to elect the Board of Directors who elects the CEO. Many informal democracies in companies. As technology makes information sharing available, we will see more use of this organizational design. Gives the example of the Mondragon Cooperative in Spain, a very democratic example even though it doesn't leverage technology. Workers are owners, one person, one vote, complex multi-level democratic structure. Workers are motivated as owners and decision-makers.

Talks through the structure of Markets and eLance. 1-10 people per firm, temporary combinations for various projects. Similar to how movies are made and housing constructed. At eLance, 200k businesses from over 140 countries registered, 40% of transactions cross national boundaries.

Intel Scenario: internal market for manufacturing capacity. Plan managers sell futures for producs they could produce at specific times in the future, Sales people trade it to be able to sell to external customers, prices fluctuate as knowledge of supply and demand changes, prices determine which products actually get produced in the factories and who gets to sell them. Could this let them produce faster, cheaper and better matched to demand? Enable greater profitability and innovation?

How much of the intelligence of people throughout an organization can we use in a decentralized organization? What percentage is effectively used today. One hand was raised at 90% (it was EEK :-). Survey is similar to the general response to the question, that most organizations don't even begin to take advantage of their human potential.

Shows a video of an experiment of collective piloting of an airplane. Amazingly, the participants successfully navigate a virtual course and has a blast doing it. Uses it as an example for how we may be able to take advantage of our collective intelligence.

What does this mean for your management style? From "command and control" to "coordinate and cultivate." *Paradox of standards: sometimes rigid standards in one part of the organization can enable much more flexibility and decentralization in other parts of the system.* For example, the internet and IP protocol. In a business, if you can figure out the right area to apply standards (quality, financial controls, etc.) and give people lots more freedom in other areas, you can be more confident about the effects. *Paradox of power: the best way to gain power is to give it away.* Linus' empowerment of the Linux community. AES and it's employees. Pierre Omidyar and eBay.

What does this mean for IT? Some of the most important innovations in the coming decades will not be new technologies. They'll be be new ways of organiating work that are made possible by these new technologies. What matters in business is what you do with IT. Another level in the technology stack that is an organizational layer. One of the most imporant messages of the talk is there will be innovations in the technology layers, some of the most important will be at the organizational layer. An important challenge and opportunity as we go forward.

What does this mean for us as individuals? You probably have more choices than you realize. To make choices wisely, you need to thing about what really matters to you. The answers can't be found from logic or politics -- they can only be found by listening to our own inner voices. Concludes by reading this passage:

What can I catually do? The answer is as simple as it is disconcerting: we can, each of us, work to put our own inner house in order. The guidance we need for this work cannot be found in science or technology... but it can still be found in the tradtional wisdom of mankind. -- E.F. Schumacher, Small is Beautiful, 1973.

Side thoughts:
* The meta transitions from decentralized to centralized to connected decentralization is really an explanation of Modernism to Post-Modernism to the Network Age.
* Would be interesting to map the three structures for decision making to three models of production by Yochai Benkler. I'd suggest that a greater role for social signals in Loose Heirarchies than the examples discovered so far.